Corruption or Ineptitude?
Monday, April 10, 2006
Navistar fires long-time auditors; to restate profits
Friday April 7, 5:22 pm ET
CHICAGO (Reuters) - Truckmaker Navistar International Corp. (NYSE:NAV - News), which earlier this year had blamed its long-time auditor for a delay in filing its annual report, said on Friday it has fired the auditor and will restate earnings going back to 2002 to fix accounting errors.
The Warrenville, Illinois-based company said its audit committee had terminated its 98-year relationship with Deloitte and Touche and hired KPMG as its new independent auditor.
Earlier this year, Navistar failed to file its Form 10K annual report with U.S. regulators and blamed the delay on differences with Deloitte over "complex and technical accounting issues."
"KPMG represents a fresh look," said Navistar spokesman Roy Wiley.
The dismissal ends a nearly century-long partnership between the two companies. Deloitte -- or one of its predecessors -- had continuously served as Navistar's accountants in one form or another since 1908, Wiley said, just six years after Navistar was founded as International Harvester.
But if the firing brings closure to a distracting dispute, it doesn't end the uncertainty for Navistar investors. The company, which also makes buses, said again on Friday that it doesn't know when it will file its annual report.
Navistar, which in late February had hinted that a restatement might be coming, said it would restate earnings for the years 2002 to 2004 and for the first three quarters of the 2005 fiscal year ended October 31.
Navistar said the items requiring correction included the way it had timed the booking of certain receivables, the way it accounted for warranties honored after they had technically expired, and the way it had shifted balances and expense amounts between reporting periods at one of its foundries.
Navistar said the known adjustments will not affect its previously reported cash flows from operations on a restated basis, but gave no further details on the impact of the restatement.
It said it was continuing to review its financials and it was likely that additional items requiring correction would emerge.
The company also said James Blanda, a former president of the Chicago Stock Exchange, was joining the company as interim corporate controller.
Navistar also said March orders for its Class 8 trucks -- the largest on-highway trucks -- were "at record levels" and said medium truck orders were the highest the company had seen in 30 years.
Navistar shares closed down 6 cents at $27.90 on the New York Stock Exchange.
On Thursday, Navistar had said it was suspending purchases of its shares by its retirement plans because the delay in filing its 10K meant the registration statements that covered the plans and the shares those plans purchased were no longer "available for use."
The delay had also prompted some Navistar bondholders to claim the company was in default on its debt and forced retiring Chief Financial Officer Robert Lannert to stay on even as he underwent treatment for a cancer diagnosed last summer.
As auditors for Parmalat and Adelphia, Deloitte was guilty of a dereliction of duty and failed to properly protect the shareholders from fraud.
"Parmalat discloses an account in the Cayman Islands supposedly worth nearly $5 Billion is fake"
New York Times
After Mr Wagoner answered that Deloitte has been our auditors for 70 years, my suggestion at the Annual Meeting was to "rotate the audit company every three years". Although this would not serve as a cure all to the issue of discovering and correcting fraud and corruption at General Motors, it is a logical first step, and would at least provide the appearance of an arm's length relationship.
Not surprisingly, Mr. Wagoner replied, "thank you Mr. Dollinger" and did nothing.